Health policies and data

Pricing and Competition in Specialist Medical Services

An overview for South Africa

The pricing of specialist and hospital services is a contentious issue in South Africa. To help inform domestic debates, the OECD Secretariat has produced a paper profiling international experiences on the pricing of specialist medical services services, competition policy and models of buying services from the private sector.

This paper presents the experiences of OECD countries in grappling with comparable challenges in four distinct sections. It begins by looking at voluntary private health insurance. The second section provides an overview of price setting across public and private health care facilities. The third covers the rationale for fixed prices and the policies and institutions through which these have been implemented. The fourth provides summaries of competition policy cases in OECD countries on price setting in health care. The final section provides four case studies of how countries have sought to contract with private health care facilities to deliver services to public patients.

Across these sections, it is argued that:

South Africa has a higher share of spending on private voluntary health insurance than any OECD country, and this serves a smaller share of the population.

In most OECD countries the public sector tends to have some form of price setting for specialist medical services, this is used to purchase services from the private sector and can provide benchmarks for private insurers.

Regulation in OECD countries generally enables collective bargaining on hospital prices. Competition policy distinguishes between public insurers with a social purpose and private insurers, and allows co-ordination among providers under specific circumstances.

Developing credible prices and large increases in public spending have been common to OECD countries that have drawn on private sector facilities to expand access to hospitals in recent years.

A suggestion from this review of OECD countries is that South Africa should separate the ‘technical’ task of establishing a schedule of medical services ranked according to their complexity from ‘political’ negotiations over overall payments to medical professionals. A technically sound price schedule can bring clarity for doctors, those that pay them, and ultimately, the patients these institutions serve. Today, the South African health care system lacks this clarity. This makes it hard for the public sector to draw on private health care services to expand access to care, and makes negotiations between private insurers and private facilities a more difficult process.

This paper was produced at the request of WHO South Africa and is available as a Working Paper (read online below or download):